Annual financial report, Chicago O'Hare International Airport

CHICAGO-O'HARE INTERNATIONAL AIRPORT
YEARS ENDED DECEMBER 31, 1980 AND IS? 9

AUG 1991

LAVENTHOL & HORWATH

CERTIFIED PUBLIC ACCOUNTANTS

4™^€>l"

S1AN

9797. 7C4

C532a

1981

City of Chicago
Jane M. Byrne, Mayor

Deportment of Aviation

Thomas Kapsalis
Commissioner

City Hall, Room 1111
121 North LaSolle Street
Chicago, Illinois 60602
(312) 744-6892

June 30, 1981

Honorable Jane M. Byrne
Mayor, City of Chicago
Chicago, Illinois 60602

Dear Mayor Byrne:

Submitted with this letter is the Annual Financial Report for the City of
Chicago O'Hare International Airport for the years ended December 31,
1930 and 1979. This report has been prepared in conformity with generally
acceoted accounting orincioles and is presented in a manner to fairly set
forth the financial position and results of operations of O'Hare International
Airport.

This letter is intended to provide background information to those not as
familiar with the airport and its operations as Your Honor, and to highlight
certain portions of the attached report, the organization, the accounting
systems and the debt service administration.

ORGANIZATION

Chicago-O'Hare International Airport, the world's busiest airport since 1961,
is owned by the City of Chicago and operated by its Department of
Aviation. The Department of Aviation is headed by the Commissioner of
Aviation, Thomas Kapsalis, who was appointed by Mayor Jane M. Byrne and
confirmed by the Chicago City Council in October 1930.

In late 1980, Commissioner Kapsalis, working together with the City's
Aviation Consultant, Landrum and Brown, Inc., reorganized the Department.
Effective January 1, 1981, the Commissioner will be aided by three Deputy
Commissioners.

Day-to-day operations at the City's three airports, O'Hare, Midway and
Meigs, will be the responsibility of the Deputy Commissioner of Airport
Operations. The 900 personnel based at O'Hare and the 50 persons located
at Midway and Meigs will be under the supervision of the Deputy Commis-
sioner of Operations and will work in such units as Field Operations,
Physical Plant Operation and Maintenance, Parking Management and
Inventory Control.

DEPARTMENT OF AVIATION

The Deputy Commissioner of Aviation Planning will provide long-term
planning of Aviation projects and supervise ongoing capital programs. The
one billion dollar retrofit planned for O'Hare will be under the jurisdiction of
the Deputy Commissioner of Planning who will coordinate activities of the
Aviation Consultant, the Supervising Architect, the City Department of
Public Works, numerous outside contractors, and the relevant Federal and
State aviation agencies.

The Deputy Commissioner of Finance and Administration will be responsible
for financial review and activities that include personnel, payrolls,
budgeting, contracts and leasing, asset control, systems analysis and design,
and electronic data processing. The Deputy Commissioner of Finance works
together with the offices of the City Comptroller and City Budget Director
in keeping the appropriate accounting records and producing the annual
financial report. Additionally, the Deputy Commissioner of Finance serves
as the department's link to the financial community.

The Department of Aviation's operations differ from those of other City
departments in two significant ways.

First, in accordance with the original O'Hare Bond Covenants, the Depart-
ment is required to prepare all budgets, plans and procedures in association
with an independent Aviation Consultant.

Secondly, the 15 airlines who were the original signatories to the O'Hare
Airport Airlines Use Agreement signed in 1958 have the right to approve all
major capital improvements at the airport. The committee of represen-
tatives from these airlines is informally known as "The Top Committee."
Landing fees are reviewed and negotiated with this committee semi-
annually to adjust revenues to meet expenditures.

BUDGET PROCEDURES

O'Hare operates as a self-sustaining enterprise. Finances are governed by
the City's Annual Appropriation Ordinance. Each year during the Spring and
Summer, a budget is prepared for approval by the Mayor and submitted to
the Budget Director by September 1. The Mayor's Budget is submitted to
the City Council in November. Upon approval by the Council, the Budget is
printed by the City Clerk as part of the Annual Appropriation Ordinance and
goes into effect on January 1 of the following year.

In 1980, the O'Hare Budget was $84 million, fifth largest of all City
departments. Midway and Meigs are separately funded.

ACCOUNTING SYSTEMS A ND_ CONTROLS

Appropriation accounting records for the Department are maintained by the
City Comptroller although the Department of Aviation approves and
processes documents for input to the system. The funds are maintained
using budgetary control procedures prescribed by the Annual Appropriation
Ordinance as approved by the City Council and administered by the Mayor's
Budget Director. In developing and modifying the accounting system for the
enterprise reporting of airport operations, consideration is given to the

DEPARTMENT OF AVIATION

adequacy of internal accounting controls. Internal accounting controls are
those procedures that are concerned with the reliability of financial records
and the safeguarding of assets. Consequently, they are designed to provide
reasonable, but not absolute, assurance that:

Transactions are recorded in accordance with management's general or
specific authorization.

Transactions are recorded as necessary (a) to permit preparation of
financial statements in conformity with generally accepted accounting
principles or any other criteria applicable to such statements and (b)
to maintain accountability for assets.

Access to assets is permitted in accordance with management's
authorization.

The records of assets are compared with their physical existence at
reasonable intervals and appropriate action is taken with respect to
any discrepancies.

The concept of reasonable assurance recognizes that the cost of a system of
internal control should not exceed the benefits derived, and also that the
evaluation of internal control factors necessarily requires estimates and
judgments by management. We believe that the internal accounting controls
existing in the Department of Aviation adequately safeguard assets and
provide reasonable assurance of the proper recording of financial trans-
actions.

For internal managment purposes, budgetary control is maintained through
the use of an encumbrance system to control costs at the su'oactivity object
level. Encumbrances which exceed appropriation authority cannot be
released unless authorized by allotment increase, transfer oc other legal
means. Outstanding encumbrances are not reflected in the statements
included in this report; however, schedules demonstrating compliance with
the Annual Appropriation Ordinance are included in the comprehensive
Annual Report of the Com_ptroller_of the City of Chicago.

The three primary sources of revenue, flight fees and related rental,
concession income and interest income are effectively controlled. With
respect to the first two items, appropriate use of information available from
the FAA is used to determine compliance with the related agreements.
Furthermore, with the assistance of The Top Committee, landing fees are
reviewed semi-annually.

The compliance by concessionaires with their agreement is controlled in
part by their monthly and annual reporting of revenues.

The outstanding effort of the Comptroller's office has allowed O'Hare to
invest available funds at the highest possible rate. This demonstrates the
positive effect of two city departments working together.

DEPARTMENT OF AVIATION

FINANCIAL HIGHLIGHTS

During the year ended December 31, 1980, O'Hare improved upon its already
good financial condition. The following highlights key financial

information:

December 31

OPERATIONS

Operating revenues
Interest income and other

Operating expenses
Non-operating expenses

Revenues in excess of expenses

FINANCIA L POSI HON

Cash and investments
Receivables and other assets
Fixed assets-net

Revenue bonds payable
Other liabilities

Total liabilities

Total Equity

1980

1979

94,259,000
7,238,000

83,144,000
5,449,000

101,497 , 000

' 76, 047, '000

4,861,000

88,593, 000

68, 3 17, "000

6,144,000

80^908,000

$ 20, 5 8 9, "00 0"

$ 87,509,000

11,908,000

221,425,000

$ 320,84270"0'0"

7^,577,000
15,327,000

74,461,000

$ 14,132,000

89,904,000
230,938,000

$ 320,842,000

$ 77,716,000

15,563,000

227,072,000

$ 320,35T,"000"

96,467,000
17,815,000

114,282,000

206,069,000
J~320, 351,000

Revenues increased by $12,904,000 or 14.6°6 over 1979. Expenses increased
$6,447,000, 8.796 over 1979, well below the inflation rate. This was due in
part to prudent management of the O'Hare Airport facilities.

During 1980, Revenue 3onds with a principal value of $21,890,000 were
retired. This is $16,154,000 more than is required in the Revenue Bond
Ordinance. As of December 31, 1980, O'Hare has retired $99,991,000 of
bonds in excess of the Revenue Bond Ordinance requirement. If the airport
retires the minimum as required by the Revenue Bond Ordinance, all bonds
will be retired 10 years before the scheduled maturity dates.

O'HARE H IG H LIGHTS

Chicago's O'Hare International Airport has been the world's busiest airport
since 1961 when it took over that title from Chicago's Midway Airport.
Despite a falloff in worldwide traffic in 1980, O'Hare had 43,600,000
passengers, some 3,000,000 more than the world's second busiest airport in
Atlanta, Georgia.

DEPARTMENT OF AVIATION

O'Hare, now in its 34th year of operation, is located on nearly 7,000 acres,
40 minutes northwest of downtown Chicago. During 1980, its 7 runways and
10 taxiways handled 725,000 take-offs and landings.

More than 25 domestic and international airlines, employing 24,000 people,
serve O'Hare. With the employees of the City of Chicago (900), the Federal
Government (2,100), concessionaires (1,500), and other support services
(6,100), the total work force at the airport approximates 35,000 people.

Passenger traffic is handled at one international and two domestic terminals
with approximately 100 passenger gates.

Cargo traffic and mail in 1930 totaled more than 1,700,000,000 pounds and
is handled at a 194 acre cargo complex at the southeast corner of the
airport.

There are 17,500 parking spaces at the airport, almost 9,000 of them in the
parking garage just steps from the passenger terminals.

One of the world's largest on-airport hotels, with 888 rooms, is operated on
land leased from the City of Chicago. Thirty-three shops, restaurants and
service facilities are located in the passenger terminals.

O'Hare is named after Edward H. "Butch" O'Hare, the Navy's first Air Ace
of World War II and a winner of the Congressional Medal of Honor. The
airport, which had served as a Douglas Aircraft Assembly Center during
World War II, was opened to commercial traffic on October 23, 1946 during
the administration of Mayor Edward 3. Kelly. After upgrading into a major
facility in the late 19.50's and early 60's, it was rededicated in 1963 by
President John F. Kennedy.

ACKN OWLEDGMENTS

To operate the world's busiest airport, while maintaining the highest of
standards for quality of service, requires the support of the Mayor and the
City Council. We extend our thanks for this vital support.

A major element in any public enterprise is the contribution of dedicated
employees. To these employees we extend our appreciation and thanks. To
the citizens of Chicago we pledge our continued efforts to maintain the
highest quality of service at Chicago-O'Hare International Airport.

Very truly yours,

\

r_^4^r>*^-^- 1

THOMAS KAPSALIS
Commissioner

cc: The Honorable Wilson Frost

Chairman of the Finance Committee

/

CHICAGO-O'HARE INTERNATIONAL AIRPORT
YEARS ENDED DECEMBER 31, 1980 AND 1979

CONTENTS

Page

Accountants' report 1

Financial statements:

Balance sheets 2

Statements of changes in contributed capital 3

Statements of changes in retained earnings 4

Statements of revenues and expenses 5
Statements of "net revenues" as defined in Revenue

Bond Ordinance 6

Statements of changes in financial position 7

Notes to financial statements 8-17

i

ASS0

Current assets:
Cash

U.S. government securities, at
Accounts receivable, less allov^
for doubtful accounts of $1,59
in 1980 and $1,908,104 in 1979
Due from other City of Chicago
Prepaid expenses and deposits
Due from restricted funds

Total current assets

Restricted assets:

Cash, including certificates of
deposit of $1,148,000 in 1980
$148,000 in 1979
U.S. government securities, at
Due from unrestricted funds
Accrued interest receivable

Total restricted assets

AND EQUITY

ets

Fixed assets:
Land

Buildings and other facilities
Construction in progress

Less allowances for depreciatio
Net fixed assets

Other assets:

Deferred engineering costs, les
amortization of $1,226,702 in
and $1,178,717 in 1979

Total assets

1980

6,036,000

10,365,401

3,064,089

19 ,465,490

180,138
150,262
907,565
247,154

1,485,119

68,541,000

412,724
89,904,333

107,951,420

8,411,830

10,502

4,712,826

43,790,698

563,050

26,601,267

84
38

,090,
f896

173
,167

122

,986

,340

230

,937

,760

1979

$ 5,736,000

10,336,473

5,828, 382

98,544

21,999,399

21,705

36,587

1,031,901

1,090,193

90,731,000

461,421

114 ,282,013

105 ,258 ,368

10,707,310
4,928,371
3,223,938

38,782,508
514,465

17,259,265

75,

25

415,
,394

,8 57
,530

100

,810

,387

206

,068

,755

$320,842,093 $320,350,768

CHICAGO-O'HARE INTERNATIONAL AIRPORT
BALANCE SHEETS,- DECEMBER 31, 1980 AND 1979

ASSETS

Current assets:
Cash

U.S. government securities, at cost
Accounts receivable, less allowance
for doubtful accounts of $1,592,760
in 1980 and $1,908,104 in 1979
Due from other City of Chicago funds
Prepaid expenses and deposits
Due from restricted funds

Total current assets

Restricted assets:

Cash, including certificates of
deposit of $1,148,000 in 1980 and
$148,000 in 1979
U.S. government securities, at cost
Due from unrestricted funds
Accrued interest receivable

Total restricted assets

Fixed assets:
Land

Buildings and other facilities
Construction in progress

Less allowances for depreciation
Net fixed assets

Other assets:

Deferred engineering costs, less
amortization of $1,226,702 in 1980
and $1,178,717 in 1979

Total assets

1980

$ 10,126,914
18,407,791

10,288,949
921,756
450,917
247 ,154

40,443,481

1,777,249
56,615,820

580,956

58,974,025

50,994,641

314,326,230

16,732,874

382,053,745

160,629,158

221,424,587

1979

$ 12,622,280
5,945,491

13,544,681

1,555,657

315,977

33,984,086

279,211

58,219,321

98,544

649,709

59,246,785

50,994,641

309,295,537

16,046,017

376,336,195

149 ,264 ,283

227,071,912

LIABILITIES AND EQUITY

47,985
$320,842,093 $320,350,768

Current liabilities:

Revenue bonds payable, current

maturities (Note 3)
Accounts payable

Due to other City of Chicago funds
Due to restricted funds

Total current liabilities

Liabilities payable from restricted assets:
Accounts payable

Due to other City of Chicago funds
Airline deposits (Note 2)
Due to unrestricted funds

Total liabilities payable
from restricted assets

Long-term liabilities:

Revenue bonds payable, less
current maturities (Note 3)

Deferred liabilities:

Deferred rental income (Note 4)

Total liabilities

Commitments (Note 6)

Equity:

Contributed capital
Retained earnings:
Reserved :

Debt service

Revenue bond retirement

Maintenance

Emergency

Construction, elevated garage

Future flight fee reduction

Unreserved

Total retained earnings

Total equity

Total liabilities and equity

1980

$ 6,036,000

10,365,401

3,064,089

19,465,490

180,138
150,262
907,565
247,154

1,485,119

89,904,333

107,951,420

8,411,830

10,502

4,712,826

43,790,698

563,050

26,601,267

84,
38

,090,

,896,

,173
,167

122

,986,

,340

230,

,937,

,760

$320,

,842,

.093

1979

$ 5,736,000

10,336,473

5,828,382

98,544

21,999,399

21,705

36,587

1,031,901

1,090,193

90,731,000
461,421

114 ,2ti2,013

105,258,36«

10,707,310
4,928,371
3,223,938

38,782,508
514,465

17 ,259,265

75,
25,

,415,
,394,

,857
,530

100,

,810,

,387

206,

,068 ,

,755

$320,350,768

See notes to financial statements,

Balance, beginning of year

Add:

Increase in fixed assets
acquired with:
City of Chicago money, net
Public utility, concession;

and airline money
Operating revenues

Less :

Provision for depreciation
Amortization of deferred
engineering costs

Balance, end of year

CHICAGO-O'HARE INTERNATIONAL AIRPORT

STATEMENTS OF CHANGES IN CONTRIBUTED CAPITAL

YEARS ENDED DECEMBER 31, 1980 AND 1979

Year ended December 31, 1980 Total

City
of

State

and

Federal

Public utility,
Concessionaire
and Airline

Total

Year ended
Decembe r 31,

Chicago

1980
$105,258,368

1979

$19,897,689

$49,972,931

$35,387,748

$ 95,617,151

Balance, beginning of year

Add:

Increase in fixed assets
acquired with:
City of Chicago money, net 3,951,994 3,951,994 4,818,150

Public utility, concessionaire

and airline money 328,282 328,282

Operating revenues 1,437,273 1,437 ,273 7,672,050

3,951,994 1,765,555 5,717,549 12,490,200

23,849,683 49,972,931 37,153,303 110,975,917 108,107 ,351

Less :

Provision for depreciation 250,299 1,541,127 1,185,086 2,976,512 2,799,915
Amortization of deferred

engineering costs 47,985 47,985 49,068

298,284 1,541,127 1,185,086 3,024,497 2,848,983

Balance, end of year $23,551,399 $48,431,804 $35,968,217 $107,951,420 $105,258,368

See notes to financial statements.

-^

Reven

bon
interierved_

Total

Total
Year ended
December 31,
1979

Balance, beginning of year

Add (deduct) :

Allocation of net revenue
Transfer of premiums on

revenue bonds retired
Interest earned on investments,

restricted
Transfer from debt service account
Fixed assets acquired with revenue

bond money
Revenue bonds retired

-394,530 $100,810,387 $ 91,501,159

4,68

590,000 21,890,000

4 f 68^390, 000 74,435,034 57,594,628

Less:

Interest paid on revenue bonds
Amounts expended for retirement

of revenue bonds
Application of deferred income

from preceding year as reduction

of flight fees
Expenditures from maintenance

reserve account
Expenditures for fixed assets

acquired with revenue bond

money
Provision for depreciation of

assets acquired with revenue

bond money

Balance, end of year

4,68

4,68

48,043,608 38,642,5tf8

173,750 375,05b

4,327,676 3,518,134

75,848
14,983,000

^84,530 175,245,421 149,095,787

4,687,497 5,769,270

21,863,894 15,358,058

17,259,265 la, 56b, 428

60,062 131,725

388,363

8,388,363

75,848

8,384,071

4,68*88,363 52,259,081 48,285,400

$ ^96,167 $122,986,340 $100,810,387

r^

CHICAGO-O'IIARE INTE NATIONAL AIRPORT

STATEMENTS OF CHANGES 4 RETAINED EARNINGS

YEARS ENDED DECEMBER 31, 1980 AND 1979

Year ended December 31, 1980

Revenue

bond
interest

Debt
service

Revenue

bond

retirement

Contruction,
elevated
Maintenance Emerg ncy garage

Total

Future
flight fee
reduction

Total
reserved

Unreserved

Total

Year ended

December 31,

1979

Balance, beginning of year

Add (deduct) :

Allocation of net revenue
Transfer of premiums on

revenue bonds retired
Interest earned on investments,

restricted
Transfer from debt service account
Fixed assets acquired with revenue

bond money
Revenue bonds retired

Less:

Interest paid on revenue bonds
Amounts expended for retirement

of revenue bonds
Application of deferred incane

from preceding year as reduction

of flight fees
Expenditures from maintenance

reserve account
Expenditures for fixed assets

acquired with revenue bond

money
Provision for depreciation of

assets acquired with revenue

bond money

$10,707,310 $ 4,928,371 $3,223,938 $38,78 ,508 $514,465 $17,259,265 $ 75,415,857 $25,394,530 $100,810,387 $ 91,501,159

4,687,497

14,476,795
173,750

( 2,295,480) 2,295,480

1,160,000 1,11 ,049

388,950 3,89 ,141 48,585

Balance, end of year

4,687,497 ( 2,295,480) 16,946,025 1,548,950

4,687,497

4,687,497

21,863,894

60,062

4,687,497

21,863,894

60,062

5,00:1,190

8,411,830 21,874,396 4,772,888 43,790,698

48,585
563,050

26,601,267 48,043,608

173,750

4,327,676

48,043,608 38,642,588

173,750 375,05b

4,327,676 3,518,134

75,848
21,890,000 21,890,000 14,983,00U

26,601,267 52,545,034 21,890,000 74,435,034 57,594,628

43,860,532 127,960,891 47,284,530 175,245,421 149,095,787

4,687,497
21,863,894

17,259,265 17,259,265

60,062

4,687,497 5,769,270

21,863,894 15,3b8,U58

17,259,265 18, 56b, 428

60,062 131,725

8,388,363

8,388,363

17,259,265 43,870,718 8,388,363 52,259,081

75,848

8,384,071

48,285,400

$ ~ • $ 8,411,830 $ 10,502 $4,712,826 $43,790,698 $563,050 $26,601,267 $ 84,090,173 $38,896,167 $122,986,340 $100,810,387

See notes to financial statements.

CHICAGO-O'HARE INTERNATIONAL AIRPORT
STATEMENTS OF REVENUES AND EXPENSES
YEARS ENDED DECEMBER 31, 19 80 AND 19 79

1980

1979

Operating revenues:
Flight fees
Rent, concessions and other

Total operating revenues

Operating expenses:

Salaries and wages

Provision for depreciation

Amortization of deferred
engineering costs

Repairs and maintenance,
including expenditures from
maintenance reserve account

Other operating expenses

Total operating expenses

Total operating income

Nonoperating income (expense):
Interest earned on investments
Discount on revenue bonds retired
Interest incurred on revenue bonds
Premium on revenue bonds retired

Net nonoperating
income (expense)

Revenue in excess of expenses

$45,610,247 $42,622,151
48,648,829 40,521,891

94,259,076

28,083,324
11,364,875

47,985

13,551,402
22,999,584

76,047,170

18,211,906

83,144,042

24,217,980
11,183,987

49,068

13,945,979
18,919,607

68,316,621

14,827,421

7,038,214 5,449,201
199,856

( 4,687,497) ( 5,769,269)

( 173,750) ( 375,058)

2,376,823 (

695,126)

$20,588,729 $14,132,295

See notes to financial statements.

CHICAGO-O'HARE INTERNATIONAL AIRPORT
STATEMENTS OF "NET REVENUES" AS DEFINED IN REVENUE BOND ORDINANCE
YEARS ENDED DECEMBER 31, 1980 AND 19 79

1980 1979

Revenues in excess of expenses $20,588,729 $14,132,295

Add (deduct) adjustments to reflect
ordinance basis of accounting:
Amounts included above in determination
of revenues in excess of expenses:
Provision for depreciation 11,364,875 11,183,987

Amortization of deferred

engineering costs 47,985 49,068

Expenditures from maintenance

reserve account 60,062 131,725

Interest earned on investments,

restricted ( 4,327,676) ( 3,518,134)

Interest on revenue bonds 4,687,497 5,769,269

Discount on revenue bonds retired ( 199,856)
Amounts not included above in
determination of revenues in
excess of expenses:
Expenditures of operating revenues

for capital improvements ( 1,437,273) ( 7,672,050)

Application of deferred income from
preceding year as reduction of
flight fees 17,259,265 18,566,428

"Net revenues" as defined in

Revenue Bond Ordinance $48,043,608 $38,642,588

Allocation of "net revenues" in
order of priority:
Revenue bond interest $ 4,687,497 $ 5,769,270

Revenue bond retirement, minimum payment 5,736,000 5,449,000
Maintenance reserve 1,160,000 1,160,000

Emergency reserve 1,118,049 1,059,030

Deferred income to reduce flight fees

in following year 26,601,267 17,259,265

Remainder, additional allocation to
revenue bond retirement 8,740,795 7 ,946,023

Total allocation of "net revenues" $48,043,608 $38,642,588

See notes to financial statements.

CHICAGO-O'HARE INTERNATIONAL AIRPORT
STATEMENTS OF CHANGES IN FINANCIAL POSITION
YEARS ENDED DECEMBER 31, 19 80 AND 19 79

1980 1979

Source of working capital:
From operations:

Revenues in excess of expenses $20f588,729 $14,132,295

Add (deduct) items not affecting
working capital:
Provision for depreciation 11,364,875 11,183,987

Amortization of deferred

engineering costs 47,985 49,068
Amortization of deferred revenue ( 48 ,697 )

Working capital provided from operations 31,952,892 25,365,350

Increase in deferred rental income 461,421

City of Chicago net contributions for

fixed assets 3,951,994 4,818,150
Airline contributions for fixed assets 328,282
Decrease in net restricted assets 667 ,686

36,900,854 30,644,921

Use of working capital:

Acquisition of fixed assets 5,717,550 12,566,049

Decrease in long-term liabilities 22,190,000 15,270,000

Increase in net restricted assets 3 ,941 ,614

27,907,550 31,777,663

Increase (decrease) in working capital $ 8,993,304 ($ 1,132,742)

Changes in components of working capital:
Increase (decrease) in current assets:
Cash

U.S. government securities
Accounts receivable

Due from other City of Chicago funds
Prepaid expenses and deposits
Due from restricted funds

Increase (decrease) in current
liabilities:
Revenue bonds payable, current

maturities
Accounts payable

Due to other City of Chicago funds
Due to restricted funds

($ 2,495,366)

$ 3,388,417

12,462,300

( 4,056,273)

( 3,255,732)

4,289,604

( 633,901)

663,868

134,940

( 17,010)

247,154

6,459,395 4,268,606

Increase (decrease) in working capital

See notes to financial statements.

300,000

287,000

28,928 (

696,966)

( 2,764,293)

5,828,382

( 98,544) (

17,068)

( 2,533,909)

5,401,348

$ 8,993,304 ($

1,132,742)

I

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CHICAGO-O'HARE INTERNATIONAL AIRPORT
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 19 80 AND 19 79

Summary of significant accounting policies:

Basis of accounting:

Financial statements have been prepared on the accrual basis
of accounting, accounted for as an enterprise fund of the
City of Chicago and conforming with the reporting requirements
set forth in National Council of Governmental Accounting
(NCGA) Statements 1 and 2.

Restricted assets:

The authorizing Revenue Bond Ordinance requires that during
the period in which bonds are outstanding the City of Chicago
will maintain trust accounts for the proceeds from the sale
of bonds and certain allocations of "net revenues" as defined.
The assets of the trust accounts may be used only for the
specific purpose of each trust, including bond interest, bond
retirement, maintenance reserve, emergency reserves and con-
struction.

U.S. government securities:

Investments in U.S. treasury bills and treasury notes are
carried at cost. Interest is accrued only on those securi-
ties having stated interest rates, i.e., treasury notes.
Discounts and premiums are recognized at the time of maturity
or sale. The aggregate cost and market value at December 31,
1980 and 1979, are as follows:

Cost Market

1980 1979 1980 1979

Unrestricted $18,407,791 $ 5,945,491 $18,567,654 $ 5,947,403
Restricted 56,615,820 58,219,321 57,047,950 57,502,039

$75,023,611 $64,164,812 $75,615,604 $63,449,442

7 T_T_T .1 _T^T^. .

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CHICAGO-O'HARE INTERNATIONAL AIRPORT

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 19 80 AND 19 79

1. Summary of significant accounting policies: (continued)

Accounts receivable:

In accordance with the Revenue Bond Ordinance, all accounts
receivable uncollected for a period of 30 days after due
date are considered uncollectible, and accordingly an
allowance for doubtful accounts is provided. As at December
31, 1980 and 1979, allowances of $1,592,760 and $1,908,104,
respectively, were recorded for these accounts. Approxi-
mately $702,000 of the 1980 accounts receivable which were
included in the allowance was collected between January 1,
1981, and May 8, 1981.

Fixed assets:

All assets are recorded at cost. Land includes the cost of
earthwork and landscaping. Assets are acquired with Revenue
Bond proceeds and three other sources as follows:

a. Assets acquired with City of Chicago money include

$333,154 capitalized interest in 1980 for the use of
City of Chicago money. Interest is capitalized from
the commencement of the land improvement or construction
activity through the year of completion.

b. Assets are acquired with state and federal money from

grants received that are reimbursements for assets
paid for with City of Chicago money. The grants are
recognized only as received. As at December 31, 1980,
a maximum of $39,145,539 may be realized in future
periods from such grants.

c. Assets acquired with public utility, concessionaire

and airline money comprise direct reimbursements of
amounts expended directly and indirectly from operating
revenues. The Revenue Bond Ordinance does not allow
the expenditure of operating revenues for capital
improvements. However, the airlines' representative
has agreed to substantially all of these expenditures,
which totaled $1,437,273 in 1980 and $7,672,050 in 1979.
Using operating revenues for this purpose has the
effect of increasing flight fees.

I

CHICAGO-O'HARE INTERNATIONAL AIRPORT

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 19 80 AND 19 79

1. Summary of significant accounting policies: (continued)

Fixed assets: (continued)

In accordance with the Revenue Bond Ordinance, all replacements
of vehicles, furnishings, signs and other equipment are
expensed when acquired.

Depreciation and amortization:

Provisions for depreciation of buildings and other facilities
are provided on a straight-line basis over the estimated
useful lives of the individual assets. Depreciation charges
are begun in the year following the year of acquisition or
completion. Deferred engineering costs were amortized on a
straight-line basis over 25 years ended December 31, 1980.

Allocation of revenues:

The Revenue Bond Ordinance requires the allocation of net
revenues, as defined, for specified purposes in the following
order of priority:

a. For ordinary costs of operation and maintenance, but

not in excess of the amount budgeted by the City of
Chicago for such purposes.

b. For amounts equal to interest payable in the current

year on bonds outstanding.

c. To maintain the balance of the Debt Service Reserve at

an amount equal to two years' interest requirements.
The Debt Service Reserve for all Revenue Bond issues
outstanding was fully funded through allocations made
in prior years. Bonds in the principal amounts of
$21,890,000 and $14,983,000 were purchased or called
during the years 1980 and 1979, respectively. The
corresponding interest requirements of $2,295,480 in
1980 and $1,569,140 in 1979 were transferred to the
Revenue Bond Retirement Reserve.

10

II

CHICAGO-O'HARE INTERNATIONAL AIRPORT

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 19 80 AND 19 79

1981

1982

1983

1984

1985

1986

1. Summary of significant accounting policies: (continued)

Allocation of revenues: (continued)

d. For required minimum payments to the Revenue bond
Retirement Reserve. The minimum payment for the year
ended December 31, 1980, was $5,736,000. Remaining
minimum Bond Retirement deposits are as follows:

Required minimum
Bond Retirement
Period payment

$ 6,036,000
6,354,000
6,685,000
7,042,000
7,412,000
through 1995 41,048,000

$74,577,000

As mentioned in Note lh below, additional allocations of
net revenues to the Revenue Bond Retirement Reserve may
be made. Allocations to the Revenue Bond Retirement
Reserve for the required minimum retirements and re-
maining revenues after all other required allocations
totaled $14,476,795 in 1980 and $13,395,023 in 1979.

For annual payment of $1,160,000 to the Maintenance
Reserve until $4,833,334 is accumulated in the Reserve.
This money is available for the payment of major
repairs, renewals and replacements. Expenditures of
$60,062 during 1980 and $131,725 during 1979 were made
from this account for the specified purposes.

To pay to the Emergency Reserve an amount equal to the
sum of the annual provisions for depreciation and
amortization of fixed and other assets acquired with
City of Chicago money and interest on City of Chicago
money invested in fixed and other assets of the Airport.

11

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CHICAGO-O'HARE INTERNATIONAL AIRPORT

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 19 80 AND 19 79

Summary of significant accounting policies: (continued)

Allocation of revenues: (continued)

f. continued:

The components of this amount for 19 80 and 19 79 are as
follows :

1980 1979

Depreciation $ 250,299 $ 220,580
Amortization 47,985 49,068

Interest 819,765 789,382

Total allocation $1,118,049 $1,059,030

Monies held to the credit of the Emergency Reserve
Account will be treated as revenues to provide for the
abatement of landing fees in the event that the Airport
is closed.

To provide for deferred income to reduce future flight
fees. To the extent that "net revenues" as defined
in the Revenue Bond Ordinance for the year, including
the application of deferred income from the previous
year, exceed "airport expense" as defined, the excess
will be considered deferred income and as revenues of
the next succeeding year. For the years ended December
31, 1980 and 1979, $26,601,267 and $17,259,265, respec-
tively, had been deferred to reduce future flight
fees .

To provide for the retirement of Revenue Bonds in addi-
tion to the minimum payment referred to in Note Id
above. Any remaining revenues after making the pre-
viously listed allocations will be allocated to the
Revenue Bond Retirement Reserve; $8,740,795 and
$7,946,023 were so credited for 1980 and 1979, respec-
tively.

12

CHICAGO-O'HARE INTERNATIONAL AIRPORT

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 19 80 AND 19 79

2. Airline deposits:

Under the terms of a Financing Participation Agreement, the City
of Chicago and certain participating airlines are sharing the
cost of improvements to the Federal Inspection area within the
International Terminal Building. The participating airlines
deposited $1,022,451 in 1979 with the City, as the airlines'
share of the project cost. The deposits are included in the
accompanying balance sheets and include interest income earned
on the funds less costs incurred for the improvements through
December 31, 1980 and 1979. The balance sheets at December
31, 1980 and 1979, include the following amounts relating to
this agreement:

Restricted assets:

Cash, including certificates
of deposit of $1,148,000 in
1980 and $148,000 in 1979

U.S. government securities,
at cost

Accrued interest receivable

Liabilities payable from
restricted assets:
Accounts payable
Due to other funds
Net airline deposits

1980

$1,152,428

18,059

177,823

85,099

907,565

1979

156,627
911,861

$1,170,487 $1,068,488

$ 36,587
1,031,901

$1,170,487 $1,068,488

13

CHICAGO-O'HARE INTERNATIONAL AIRPORT

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 19 80 AND 19 79

3. Revenue Bonds and retirement:

Revenue Bonds:

The Chicago-0 'Hare International Airport Revenue Bonds were
issued under the authority of an ordinance adopted December
29, 1958, and subsequent supplemental ordinances. The Bonds
were issued to provide monies for the initial construction
and subsequent extensions and improvements of the Airport
and its facilities. The following information is presented
regarding the status of the Bonds as at December 31, 19 80
and 1979:

1980

1979

Amount authorized

Amount sold

Amount called or purchased

and retired
Amount outstanding at

year-end

$238,000,000 $238,000,000

232,000,000 232,000,000

157,423,000 135,533,000

$ 74,577,000 $ 96,467,000

The Revenue Bonds outstanding at December 31, 1980 and 197 9,
are comprised of the following:

1980

1979

4 3/4% Series

4 3/4% Series

4 1/4% Series

4 1/2% Series

of 1959
A of 1961
B of 1961
of 1967

5% Series of 1968
6.80% Series of 1970
6% Series of 1972

Less current maturities

$27,203,000
5,677,000
736,000
1,289,000
5,817,000
29,085,000
4,770,000

74,577,000

6,036,000

$68,541,000

$38,548,000
8,030,000
1,116,000
1,806,000
7,592,000
33,800,000
5,575,000

96,467,000

5,736,000

$90,731,000

14

CHICAGO-O'HARE INTERNATIONAL AIRPORT

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 19 80 AND 19 79

Revenue Bonds and retirement: (continued)

Retirement:

Revenue Bonds are to be retired as rapidly as practicable
through the revenues allocated to the Revenue Bond Retirement
Reserve. Bonds may be redeemed by call at prices ranging
downward from 104.5% to 100% of principal amount to December
31, 1995, plus accrued interest. In addition, Bonds may be
redeemed by purchase in the open market or tender at prices
not in excess of the next predetermined call prices. The
following information is presented regarding Bonds purchased
or called for retirement during the years ended December 31,
1980 and 1979, and the cumulative amounts through December
31, 1980:

Cumulative 1980 1979

Par value of bonds

purchased or called $157,423,000 $21,890,000 $14,983,000
Cost of bonds

purchased or called

(excluding premium) $150,922,175 $21,690,144 $14,983,000
Premiums paid on

bonds purchased or

called $ 1,944,536 $ 173,750 $ 375,058

Premiums paid on Bonds purchased or called are charged to Air-
port operations in the year of purchase. Discounts on Bonds
purchased are retained in the Bond Retirement Reserve to pur-
chase additional Bonds.

Bonds also may be redeemed with monies that are not allocations
of revenues to the Retirement Reserve. Call prices for this
type of redemption have been adopted which exceed the
previously referred to call prices by not more than 2% of
principal amount.

15

CHICAGO-O'HARE INTERNATIONAL AIRPORT

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1980 AND 1979

4. Deferred rental income:

In 1979, the City of Chicago consented to the assumption by a
third party of a bankrupt tenant's lease and received $461,421
from the sale of such lease. The sales price is recognized
annually over the remaining life of the lease parallel with
the rental escalation terms of the assumed lease approximately
as follows:

1980-1982 $48,700

1983 53,800

1984-1987 58,400

1988 $28,000

5. Pension plans:

The employees of the City of Chicago are covered under various
contributory retirement plans established by state statute and
administered by independent pension boards. Substantially all
of the Airport employees are members of the Policemen's Annuity
and Benefit Fund of Chicago, the Firemen's Annuity and Benefit
Fund of Chicago, the Municipal Employees', Officers' and
Officials' Annuity and Benefit Fund of Chicago or the Laborers'
and Retirement Board Employees' Annuity and Benefit Fund of
Chicago.

Each pension plan is financed primarily by (a) City contribu-
tions, (b) employee contributions, and (c) income from pension
fund investments. The City contributions, which are established
by state statute, are multiples of the employee's contribution
made two years prior. The City's contribution is financed
through a separate property tax levy and the personal property
replacement tax. The Airport reimburses the City's Corporate
Fund for the estimated contribution which pertains to Airport
employees. These reimbursements , recorded as expense, amounted
to $2,813,804 and $2,476,506 in 1980 and 1979, respectively.

All pension funds receive an actuarial valuation annually. How-
ever, the amount of unfunded liabilities or required current
year actuarial provisions which pertain expressly to the Airport
are not computed, as no specific identification of Airport
employees is made for actuarial purposes.

16

CHICAGO-O'HARE INTERNATIONAL AIRPORT

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 19 80 AND 19 79

6. Commitments:

Purchase orders and contract commitments to be financed by the
operation and maintenance account totaled $11,64 5,426 at
December 31, 1980. In addition, $18,363,074 of the Airport's
unexpended appropriations as at December 31, 1980, has been
earmarked by Airport management for specific future projects,
although not under purchase order, contract or other formal
commitment.

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